Mortgage lending in June 2016 hit its highest figure for the month since 2008 despite the uncertainty surrounding the UK's Brexit referendum, in which Britain voted to leave the European Union (EU). The Council of Mortgage Lenders (CML) said that gross mortgage lending in June was £20.7bn ($27.3bn, €24.8bn), up 16% on May and 3% higher than the same month in 2015.
"The result of the EU referendum is likely to affect the housing market, but there remains considerable uncertainty," said Mohammad Jamei, a senior economist at the CML. "Although mortgage firms have ample lending capacity, activity levels are likely to bear the brunt of any market adjustment over the next six months or so, as buyers and sellers wait to get a clearer idea of where we might be headed.
"But as with the economy, the UK housing market's starting position is relatively favourable, with transactions having increased by almost 80% from post-crisis lows.
Over the next six months, activity is likely to soften modestly, while lending will be driven more by remortgaging and less by house purchases."
Some economists think the economy may now fall into recession as businesses delay or pull investment after the 23 June EU vote. A Treasury analysis of Brexit released pre-referendum suggested that a severe economic shock could send house prices crashing by as much as 18%.
To stave off a slowdown, the Bank of England is mulling a cut to its all-time-low base rate, currently 0.5%, and perhaps more quantitative easing on top of the £375bn of gilt purchases already made since the financial crisis. But a survey by the Bank of England of the immediate aftermath of the referendum suggests it is business-as-usual for many firms who are waiting for a clearer picture to emerge of what Brexit entails before making any big decisions.
Before Brexit negotiations can start, the UK government must invoke Article 50 of the Lisbon Treaty. Once invoked, there is a two-year time limit on the process to leave the EU. There are still many unknowns about Britain's future relationship with the EU, such as if it will remain in the single market and retain free trading access to the bloc.
"Mortgage lending is continuing to increase on an annual basis despite uncertainty around the EU referendum, illustrating that people's desire to own a property remained strong in the run-up to the vote," said Andrew McPhillips, chief economist at Yorkshire Building Society.
"The outcome of the referendum could cause some prospective buyers to postpone entering the market until the dust has settled, prompting a short-term slowdown in activity. That said, we still expect lending to continue to grow in the coming years, albeit at a more reduced pace due to decreased foreign investment and uncertainty around the future economic landscape following the UK's decision to leave the EU."